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Containerisation and the Industrial System: An Insider's View

Graham Gilbert


Introduction

In this paper I have outlined the Industrial background of the waterfront and container terminal industry. I have recounted some case histories to illustrate the way in which the industrial system operates in practice. One can only speculate on the effect of this environment on Australia's international trade and its economy. Already coastal shipping has fallen victim to unbearable maritime and stevedoring costs.

It is sometimes said by apologists for the industrial establishment, and always by the unions, that bad management is the principal cause of whatever problems exist on the waterfront. My thesis is that the ability to manage on the waterfront, in the sense that this implies control, direction and responsibility, has been all but lost under the massive weight of union power entrenched by industrial legislation and the one-sided way that the legislation is administered.


Background---The Industry

Prior to the introduction of containerisation, stevedoring in Australia had gradually become concentrated in the hands of a few companies, resulting in each port having only two or three stevedores. By far the largest, with operations throughout Australia, was Patricks, very much under the personal control of Reg (later Sir Reginald) Reed.

Reggie Reed had a phenomenal rise to success and riches due in no small way to the very close relationships which he established with union officials. Many a shipping line customer of Patricks was happily impressed by Reggie's uncanny and mysterious influence with the Waterside Workers Federation (WWF). The WWF has an absolute monopoly on the handling of general, and most bulk, waterfront cargo. The union was, in the 1960s and 1970s, under the firm hand of the brilliant and articulate Charlie Fitzgibbon. Organisationally, the WWF is surprisingly democratic, with elections and rules scrupulously observed. Its Federal officials are regarded as being politically and economically sophisticated but their ultimate authority, once acknowledged by all members, has of recent years become somewhat eroded. The local (i.e. port) branches behave with less responsibility, particularly Sydney which is the scene of vicious infighting between proponents of the communist and socialist ideologies.

By the late 1960s, only a small number of waterside workers were employed directly by the stevedoring companies. The great majority were employed by an offshoot of the employers' association and allocated on a daily basis to stevedoring companies as required. In an attempt to curb the concentration of power in the stevedoring industry, overall supervision of the waterfront was vested in the Australian Stevedoring Industry Authority (ASIA). This government body, amongst other functions, administered discipline, controlled admission (by registration) and attempted to maintain standards of performance. It was resented by both employers and unions, no doubt because of its enforcement powers and its effectiveness. As a result of the Kirby inquiry in 1977, the organisation was disbanded and all waterside workers distributed to the then existing employers.

One of the arguments supported by both employers and unions at the Kirby inquiry was that the direct employment of waterside workers would result in an immediate transference of loyalty to the new employer, thus reducing the incidence of strikes. Incredibly, this nonsense was taken quite seriously. Of course the WWF was anxious to escape from the constraints and enforcement powers of the ASIA, which was completely unimpressed by the exercise of industrial muscle. The employers, who resented its inhibitions on such incentives as the 'job and finish' and other sweetheart deals, were equally keen to see its demise.

Of the many waterfront union groups, the most difficult to deal with, by far, were the Tally Clerks, a maverick component of the Federated Clerks Union (FCU). Traditionally, Tally Clerks were employed, usually on a casual basis from a union-operated pool, to check the unloading, loading, receival and delivery of cargo. Often drawn from the ranks of former waterside workers, the Shipping Section of the FCU inherited similar militant and irresponsible tendencies. Their attitude was conditioned by the knowledge that both containerisation and technology would inevitably affect their jobs and reduce employment opportunities. In the late 1960s, this group found a leader in Joe Riordan, who had recently taken over as Federal Secretarly of the FCU. Riordan had successfully campaigned to remove the former communist incumbents and was regarded as a political moderate, although he appeared to distance himself from other executive officers of the union whose NCC affiliations were not generally acceptable in Labor Party circles.


Containerisation---Its Introduction

The containerisation of sea freight had been pioneered by the legendary Malcolm MacLean, developed by Matson Line for its Hawaii/mainland service, and in the 1960s adopted by Associated Steamships Pty Ltd (ASP) for its Australian coastal service. The first long-haul international freight service to become containerised was the Europe/Australia run initiated by the arrival in 1969 of the UK-based Overseas Container Line (OCL) containership, 'Encounter Bay'. Australia's first major landbased container facilities, with port terminals in three States, were Seatainer Terminals Ltd---a joint venture of ASP and OCL.

Briefly, the benefits of containerisation related to greater efficiency and reduced costs, faster and larger vessels, reduced delays in port, and greater security. Given the capital investment that was readily available, and the commitment of major shipping and transport interests, why after all this time have these objectives not been realised in Australia? It is an unfortunate fact that, despite some minor improvements in the last few years, the average handling rate of containers in this country is far less than elsewhere, even than New Zealand, and the consequent cost per ton much greater.

Of course, not all of the blame can be ascribed to the institutionalised industrial environment that characterises the waterfront. However, the following few examples perhaps illustrate the principal reason why management in this industry expects to devote 80 per cent of its time to labour-related and industrial affairs. In no other Western country that I know of are there greater constraints on efficient management than in Australia. Nowhere else do the unions have a greater capacity to thwart progress and mindlessly impede constructive innovation than in this country---all the while protected by quasi-legal apparatus whose detrimental effect on the nation's well-being is seemingly inviolate.

The context of these few examples, and the present state of the industry (once again the subject of government inquiry, this time having Royal Commission status), should be seen in the light of the naivete and idealism of those who first introduced containerisation to this country in the late 1960s. The vision was simple: to establish a 24-hour-a-day, factory-type environment. Containerships would be unloaded and loaded without delay or interruption. Container handling equipment would continuously work at maximum design rates. Containerships would soon be arriving and departing in continuous stream so that berth occupancy and crane utilisation would be 100 per cent or nearly so. Naturally it was expected that this arrangement would have its price. There was ready agreement to work 5 days on and 3 days off on rotating shifts, i.e. normally a 35-hour week at most. Four weeks annual leave was conceded, a benefit with precedent only in the coal industry. Unlike conventional stevedoring, the work would be predictable, comfortable and with high-quality amenities. The income of workers would be more than 50 per cent higher in container terminals than elsewhere on the waterfront. All workers would be permanent employees of the terminal company and the use of casual pool labour would be unnecessary. In short, work in the container terminal would be reserved for a technically superior elite labour force, dedicated to the objective of constantly improving efficiency and all the while grateful for the greatly advanced benefits and conditions provided.

Thus in 1967 a broad agreement was reached with all unions under the auspices of the ACTU called the Container Industry Agreement. In return for numerous generous working conditions and the introduction of new rosters, the parties agreed to a procedure for resolving disputes which required negotiation with unions at various levels, local, State, finally Federal. During these negotiations it was agreed that normal work would continue.

Well, we all have visions. This one did not take long to evaporate under the heat of union power and privilege in the forum presided over by Mr Justice Moore. As a presidential member of the Conciliation and Arbitration Commission allocated to the waterfront industry, Mr Justice Moore took as his appointed task the literal, constitutional, requirement to '. . .prevent and settle industrial disputes', making clear that his charter made no reference to justice, fairness, morality, principle or economic benefit.

With another ingredient being the need for this highly capital-intensive industry to be kept moving at almost any cost, and with decisions often being made by the local agents of overseas shipping companies (whose long-term stake in the industry, or even the country, might be tenuous at best), the outcome might have been entirely predictable.

The reaction of the unions to the impending introduction of containerisation was suspicion and hostility. Their predictable stance was that no change would be permitted to occur without generous recompense to their members and a fair carve up of the spoils between unions. To achieve this objective, unconstrained industrial pressure was applied. Notwithstanding that the Container Industry Agreement bore the signature of the then president, R.J. Hawke, appeals to the ACTU to have its members abide by the agreement at least in so far as the avoidance of disputes procedure was concerned---were without exception ignored. Thus the original Agreement became the archetype of all future negotiated agreements and awards in which the unions readily accepted the benefits but repudiated their agreed obligations---with complete impunity within the Australian industrial system. Joe Riordan, Federal Secretary of the FCU, promised that the whole investment would be a white elephant and prove to be uneconomic due to union resistance unless terms acceptable to his union and its members were agreed upon. Claiming to be a supporter of the arbitration system despite the indifference of his followers to its edicts if dissatisfied, Riordan wielded a lot of clout. The need to keep the waterfront moving, together with a desire to keep moderate union leaders in office, appeared to result in the FCU being accorded preferential treatment over other unions and being successful in disputes on wages and conditions, feather-bedding and restrictive work practices.


Memorandum of Understanding

In 1967 a dispute between shipowners and the FCU was heard before Mr Justice Moore over the Easter weekend. The tentative and temporary settlement was recorded in a poorly worded document and ultimately achieved notoriety under the title of the Memorandum of Understanding. Ostensibly an agreement, it was regarded by all as an unofficial decision by Mr Justice Moore. As a conciliator, no less than an arbitrator, he was a dominating (at times domineering) pragmatist, without concern for anything but a settlement that would be acceptable to the strongest party and would stick. His 'recommendations' carried with them the implicit threat, especially to the weaker party, of worse to befall it now or hereafter at his hands if his recommendation was not accepted, regardless of the merits of the issue.

The gist of the 1967 Memorandum was that only those clerks nominated by the FCU would be employed at container terminals and that Tally Clerks must be employed wherever containers are packed or unpacked (except if the entire contents were for a single consignee). Furthermore, the employers undertook to provide the FCU with information about the movement of containers in order to assist the union to police the agreement.

The implication of this was that by agreement between the FCU and the shipping companies, as recommended by Mr Justice Moore, Tally Clerks were to be installed in places remote from the waterfront and given the power to control the movement of containers and cargo. The impact of this on organisations not present at the hearing before Mr Justice Moore, particularly transport operators, freight forwarders, wool stores, etc., and even other unions such as the TWU, can be imagined.

Over the next two years a great deal of manoeuvring took place. The FCU's Shipping Section (the Tally Clerks) were busy creating on-the-job disputes and serving logs claiming coverage on employers who may in future be likely to pack or unpack containers. In the early part of 1969 disputes were created in container terminals and depots in an attempt to further feather-bed the new container industry, which resulted in Mr Justice Moore 'strongly recommend[ing] that the 1967 Understanding be revived'. In this case the Association of Employers of Waterfront Labour was a party to the hearing and lost no time in directing its members to comply.


Management I---Discipline

One of the very first industrial issues that I became involved in occurred at the Seatainer Terminals Ltd White Bay container terminal in Sydney just prior to my arrival in 1971.

At the time the relationship between the Tally Clerks (i.e. the Shipping Section of the FCU) and Seatainers was more than a little tense. Already the Conciliation and Arbitration Commission had ruled against the company's plan to use staff supervisors to man the control tower. Another case was current in which the clerks were demanding substantial increases in manning, The clerks had, by virtue of the success of their almost continuous industrial action, and decisions in their favour obtained by Joe Riordan from Mr Justice Moore in the Commission, concluded that they were in complete control and were not averse to demonstrating their power.

In February 1971, the Assistant Shift Supervisor came across two clerks in the control tower with bottles of beer half consumed. When instructed to report to the Shift Supervisor they refused. By the time they were interrogated the evidence had disappeared and the supervisor was challenged to prove that they had in fact been drinking on the job (a dismissal offence). Subsequently beer bottles were discovered and photographed on the premises. The terminal Manager, on the grounds that the clerks had refused to report to the Shift Supervisor as instructed and had obviously been drinking on duty, thereupon dismissed the two clerks.

Predictably the whole container terminal then ground to a halt as all of the clerks went on strike, demanding their colleagues' reinstatement. As was normally the case, all other employees reported for work and continued to be paid. Experience had shown that any attempt to obtain usable stand-down rights as an award variation through the Commission would be futile, particularly in the face of implacable opposition from the WWF. In due course, the matter surfaced at the Conciliation and Arbitration Commission where it was heard before Mr Justice Moore. By this time the cost to the company, and to others with delayed cargo and delayed vessels, had run into millions of dollars. After hearing argument in detail, and some three months after the event, Mr Justice Moore decided that rather than continuing with arbitration, as requested by all parties, he would make a recommendation. It is worth quoting verbatim:

    'I recommend to the company that these two men be re-instated. This recommendation does not mean that I have formed any conclusions on the merits of the case one way or the other. It does not in any way reflect on management or on the supervisory staff nor on the two men concerned. It only means that I consider it desirable in the interests of everyone that they should be re-instated now.'

The company, terrified at the prospect of even worse treatment and greater losses if it chose to ignore this recommendation, complied. Accordingly the two clerks were paid the wages that they would have received had they been at work, instead of at home, for the three months since their dismissal. Needless to say, the popular perception of all this was to reinforce the view that the company was weak and inept, and fair game for further exploitation.


Management II--Innovation

At about the same time, in 1970, Seatainers were attempting to introduce a system of planning, control and communication (the PCC system) in all its container terminals. This system had been devised by a firm of consultants to integrate information about the movement and status of containers, using teleprinters at various locations within the terminal to transmit details to a central control office. The basic purpose of the proposed PCC system was to improve efficiency, but there were implications as far as the Tally Clerks were concerned. Initially, the company intended to increase the number of clerks employed at its Sydney container terminal from 62 to 82. At this point the PCC system would have reserve capacity, and the expected increase in terminal throughput as new trades became containerised could be easily absorbed without further manning.

Of course the clerks could see no merit in this, and refused to participate in any training or to use the new equipment. This impasse was brought before Mr Justice Moore in July 1970. The hearing proceeded, with various adjournments, for three months during which time the system was inoperative. Notwithstanding assurances and offers by the company on these points, the case was allowed to drag on without resolution. In October 1970, Riordan suddenly announced that he required the manning to be increased to 109 clerks as the price for his unions co-operation. Once again, the hearing was adjourned.

Thereafter, issues involving rosters, hours of work, etc. were introduced by the union. It became clear at least to Seatainers that Riordan could delay indefinitely any changes proposed by management by raising new, often unrelated, matters when the Commission reconvened. The status quo continued through 1970 and into 1971 with many adjourned and indecisive hearings. Mr Justice Moore, although expressing exasperation himself from time to time, was very careful to be seen to be even-handed. For example, in March 1971, he was constrained to say:

    '...this has been a long process and it has been going on now for some time. This from my point of view---the industrial relations point of view---means the situation is probably deteriorating instead of improving, and although I do not want to rush anyone I think that these problems that you raise and which the company raises have to be dealt with reasonable quickness. I am not suggesting we gallop through the whole thing, but there cannot be too much delay because the whole thing will go really sour. Having said that I wonder where we go from here.'

The answer was, not very far. Finally in May 1971, nearly a year after the company first appealed to the Commission to support, and if necessary enforce, its right to make legitimate changes, a decision was handed down.

In giving his decision, Mr Justice Moore made some revealing philosophical observations:

    'I have constantly reiterated that my main objective has been to restore good working relations at the terminal and I trust that the decisions that I am about to announce and which are essentially compromises will be accepted by both the men and the company as a genuine attempt to achieve a situation which will enable the company to run its terminal in an economically sensible way and at the same time will ensure that the interests of the men are protected and the relationship between management and men remains good.'

and

    'I have endeavoured as best I can to strike a balance between the rights and wishes of the company and the rights and wishes of the men. It may not be a perfect solution but it is a compromise which I think should produce a favourable result if it is allowed to work.'

In the main his decision did much to endorse the company's rights; sadly, however, it did nothing to assist in implementing the changes required. It has been amply demonstrated throughout these drawn-out proceedings that the Conciliation and Arbitration Commission, under the presidency of Mr Justice Moore, would not enforce compliance with negotiated agreements and awards, much less with its own decisions. The Commission's abdication of its constitutional enforcement powers was a clear announcement of its impotence to administer labour contracts fairly and justly as implied by the Award system---a pyrrhic victory indeed, the hollowness of which was perceived by all unions and the industry workforce.


Management III--With Friends Like These?

For the sake of objectivity, I should recount the story of my final major involvement with the FCU. The Glebe Island container terminal had been established by the Maritime Services Board of NSW in 1973 with an elementary computer system. A year later, after considerable criticism and complaint, the whole container terminal facility and equipment were leased to the newly-formed company, Glebe Island Terminals Pty Ltd to be operated as a common-user container terminal. In the early stages, up to 1976, clerk manning levels had been progressively increased to deal with additional business. Thereafter, computerised control systems were technically improved and the requirement for Tally Clerks decreased.

Accordingly, attempts were made to eliminate certain jobs and reduce the number of Tally Clerks employed. Negotiations and rational argument were, as usual, of no avail---either directly with the FCU or in the Commission---so the status quo prevailed.

The company, Glebe Island Terminals, had four equal shareholders, including Farrell Lines Inc. in New York (who also owned a large part of another shareholder, and thus controlled somewhat more than 25 per cent) and Patrick Operations Pty Ltd. Patricks had a very long association with Farrell Lines, having had their stevedoring business for many years. The Governing Director of Patricks was Sir Reginald Reed, Chairman of Glebe Island Terminals.

In 1982 the emergence of competition and an economic downturn in the economy were recognised as a threat to the company's viability. The importance of saving costs by reducing the number of Tally Clerks could no longer be ignored. Thus action was approved by the Board of Glebe Island Terminals intended to achieve these economies, but which, entirely predictably, effectively shut down the terminal.

On this occasion the company had sought and obtained the co-operation of its shipping line customers and other users of the terminal. The Board itself considered that there was no alternative, being a matter of profit or loss (the company had reported a profit in every year since its inception). It appeared that the case for reduction in the number of Tally Clerks was incontestable, particularly as redundancy/retrenchment arrangements had already been negotiated on an industry-wide basis. During this period, while the clerks (but no others) were on strike, negotiations were held in Melbourne with the Federal President of the FCU. The departure of Joe Riordan into Labor Party politics had deprived the Sydney branch of the FCU's Shipping Section of its champion and advocate. For the very first time, it appeared that reason might prevail. Discussions at the Federal level were constructive, and agreement was reached with the union for a substantial reduction (from, I believe, 66 to 35) in the number of clerks. The Tally Clerks in Sydney, needless to say, refused to accept this and continued with their strike despite their own union's recommendation. At the same time the matter was being heard in the Commission where the local clerks had brought back to represent them none other than Joe Riordan himself. In the event (not before Mr Justice Moore), the Commissioner's decision went against the clerks, which shattered their faith in their hitherto champion but did not get them back to work.

Many shipping lines, and particularly the two which had representatives on the Board of the company, were accumulating even greater losses. The Shipping Section of the FCU had made it clear that vessels normally worked at Glebe Island would not be serviced elsewhere. However, it was also becoming apparent that the clerks were losing their resolve, and for the first time in 12 years were facing defeat. Accordingly, the union booked the Balmain RSL for all members to meet and be told that they must return to work and accept the manning reductions required by the company (under threat of expulsion from the union). There was no doubt that this formality would signal a most significant breakthrough for all employers and represent a fundamental change in the balance of power on the waterfront. Never before, in the short history of containerisation, had the entire industry, and employers, maintained the fortitude to withstand such pressure until victory was finally achieved. What an achievement! At last, justice and right would prevail.

Simultaneously, word came from the headquarters of Farrell Lines, the major shareholder in Glebe Island Terminals, that the strike must cease---the cost had become unbearable for them. The Directors were shocked at this development since they were convinced that victory was in sight, a view held by all users of the terminal and the industry at large. However, Farrell Lines, with its long-time stevedore Patricks, effectively controlled the company, so I, as the General Manager, was directed to have the terminal working within 24 hours.

On the next, fateful, day, the Board of Glebe Island Terminals met as usual in Patricks offices---while the clerks assembled at Balmain. I reported to the Directors that I had the union's assurance that the clerks would return to work after their meeting. It is true that the local Shipping Section had not always responded to their own union's directives, but this time it as common knowledge that they had had enough and were ready to capitulate.

While the Glebe Island Board was awaiting the good news from Balmain, the Chairman answered a phone call from New York. It seems that Farrell Lines required an immediate end to the dispute and were not prepared to wait even one minute longer.

Incredibly, after the very briefest discussion, I was instructed by my Chairman, Sir Reginald Reed, to telephone the Balmain RSL immediately and inform the FCU representative that the company would not reduce the number of clerks employed. They returned to work next day and the strike was over. The role of the Conciliation and Arbitration Commission in this sorry episode may be regarded as peripheral, but nonetheless the end result was clearly a product of the Australian industrial system.


Postscript. . .

Within two years, the Shipping Section had seceded from the FCU and been accepted by the WWF, Farrell Lines had terminated all services and closed down its operations in Australia, Patricks had become a subsidiary of Howard Smith Ltd and acquired all of the shares in Glebe Island Terminals (and had negotiated a considerable reduction in manning). Sir Reginald Reed had died, and I had left the country.

Today the industrial process and apparatus continues virtually unchanged. Joe Riordan, having had an undistinguished career outside the system that he knows so well, has returned to become a Deputy President of the Conciliation and Arbitration Commission....

Sir John Moore, formerly Mr Justice Moore, is now Chairman of the Stevedoring Industry Review Committee. Established in 1986, the Committee's charter requires it to consider all aspects of improving efficiency and productivity, and gives it power to implement changes in management and practices. Predictably, the Committee comprises equal members from the employers and from the unions....

Plus ca change....


Conclusion

In Australia, as in many other countries, the waterfront is the scene of conflict between powerful opposing forces. The employers and shipowners require speedy turnaround to service their investment; the workforce, if given the opportunity to exploit this need, will combine resolutely to do so. The employers' objectives are achieved when relations are harmonious and stable; the unions flourish and their leaders prosper, at least politically, in turmoil and struggle. Governments from time to time feel obliged to intervene and typically do so by creating an independent controlling authority or a tribunal to limit the excesses of the most powerful protagonist. Inevitably such initiatives must fail due to changing political or economic influences. In my time I have observed the dismantling of the Australian Stevedoring Industry Authority and the decay into irrelevance of the Conciliation and Arbitration Commission and its attendant paraphernalia.

One is forced to ask: Why, in this day and age, do we require an industrial system at all? Why do we have legislation that gives privilege and immunity for union behaviour that is not available to citizens? Why cannot a freely negotiated agreement between employer and employee (i.e. a consent Award) have the same legal status as any other contract between consenting parties? Perhaps, one day, a government will have the will and courage to address these issues. Possibly the vision of those pioneers of containerisation may yet be realised. Only then will all Australians enjoy the economic benefits and standard of living that can flow on from an internationally competitive, efficient and revitalised waterfront industry.

Why HR Nicholls?

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